Fundamentals of Economic Activity and Labor Markets

What is Economic Activity?

Economic activity encompasses all processes used to obtain goods and services that people need. This includes essentials such as food, clothing, housing, or medical attention.

Phases of Economic Activity

Economic activity is typically divided into three main phases:

• Production

  This phase involves the creation of goods and services.

• Consumption

  This is the process where individuals and households buy and use goods and services to satisfy their economic wants and needs.

• Distribution

  This phase refers to the movement of goods and services from their places of production to the consumer.

Evolution of Payment Methods

Throughout history, various methods have been used for payment:

• Barter
• Natural coins (e.g., shells, salt)
• Metal coins
• Paper money
• Bills of exchange and cheques
• Plastic and electronic money

The Role of Technology in Economics

Technology is profoundly important for companies and the economy because it:

• Increases production and productivity.
• Saves labor costs.
• Creates new goods and innovative methods of production.

Types of Production Technology

Production processes can be categorized by their level of automation:

• Manual
• Mechanical
• Automated

Knowledge and Know-How in Economic Growth

A country's economic growth significantly depends on its knowledgeable population. Therefore, countries must invest in research centers and maintain a qualified education system.

Know-how refers to the practical skills and expertise necessary to successfully carry out an activity or task.

Work and Productivity

Work is the primary source of income for the majority of the population. Key aspects include:

• The productivity of a worker, which measures output per unit of input.
• Teleworking (trabajan desde casa): The practice of working from home or a remote location, often using digital technology.

Population and the Workforce

Understanding the composition of a country's population in relation to work is crucial:

• Economically Active Population

  This includes everyone aged 16 and over who is either employed or actively seeking work to produce goods or services. This group is further divided into:

  • Employed: Individuals currently holding a job.
  • Unemployed: Individuals without a job but actively looking for work.

• Economically Inactive Population

  This includes everyone aged 16 and over who is neither employed nor unemployed (e.g., students, retirees, homemakers, disabled individuals).

Types of Paid Employment

Paid employment can take various forms:

• Work for an Employer: Traditional employment where an individual works for a company or organization.

• Cooperatives: Organizations where members use a democratic process to make decisions and share profits.

• Self-employed Workers: Individuals who work for themselves, rather than for an employer.

Understanding Unemployment

Unemployment is a significant economic challenge, manifesting in different forms:

• Cyclical Unemployment: Occurs due to changes in the overall level of economic activity, often during recessions.

• Seasonal Unemployment: Arises from variations in certain economic activities throughout the year (e.g., tourism, agriculture).

• Structural Unemployment: Results from mismatches between the skills workers possess and the skills employers need, often due to technological changes, shifts in industry, or lack of appropriate training and investment for new jobs.

• Technological Unemployment: Happens when technical improvements and automation replace human labor.

Consequences of Job Loss

Widespread job loss has several negative impacts on an economy and society:

• Consumption decreases, leading to reduced demand for goods and services.
• Tax collections decrease, while government spending on social welfare programs increases, potentially leading to budget deficits.
• The underground economy (mercado negro or black market) may expand as individuals seek informal income sources.
• People's behavior and social well-being can change, leading to increased stress, poverty, and social unrest.